Ignazio Visco: Latest financial and economic developments affecting Italy

Speech by Mr Ignazio Visco, Governor of the Bank of Italy, at the 24th Congress of ASSIOM FOREX (the Italian financial markets association), Verona, 10 February 2018.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Global growth strengthened considerably last year although uncertainties remain linked to future US trade policies and possible upward shifts in risk premiums in the financial markets. Monetary policy in the euro area has staved off deflation but inflation is still far from the levels consistent with monetary stability.

Economic activity in Italy appears less dependent on the expansionary stance of monetary and fiscal policies. The consolidation of the recovery requires us to proceed with the economic reform effort. Prudent budgetary policies will help make markets more confident in the reduction of the public debt-to-GDP ratio.

Lending to households and firms is expanding and loan quality is improving, partly thanks to the successful handling of the most critical situations in the banking sector. The reduction in non-performing loans must continue, exploiting the favourable economic conditions. Competitive pressures and a challenging regulatory environment have made it urgent for banks to continue to limit costs and to fully recoup profitability, including through additional mergers. These needs are especially pressing in the mutual banking sector, where the 2016 reform must be implemented in toto.